Comments for Irvine Housing Blog

Comment on IHB News 11-7-2009 by Oh ninja puleeze

Oh ninja puleeze — Sun, 08 Nov 2009 02:52:54 -0800

Well not a lot of narrative on this fine home offering. (not)

I’ve been reading IHB from the beginning, not many comments from me BUT if ever there was a knee-slapper ... Ohhhh ninja puhLEEZE!!!

Comment on Revealed by Freetrader

Freetrader — Sat, 07 Nov 2009 20:39:03 -0800

The “owner” of this property apparently made his or her last payment before November 2006. Adds up to about 36 months to me. You are perhaps using some sort of ‘new math’ system?

Comment on IHB News 11-7-2009 by norcal

norcal — Sat, 07 Nov 2009 17:31:30 -0800

And we will weep hot, bitter tears for them.

Comment on IHB News 11-7-2009 by norcal

norcal — Sat, 07 Nov 2009 17:30:04 -0800

Hi MB. In response to one of your last points, I don’t think it’s higher house prices that support the economy, but wages and employment. That’s why governments are encouraging building new homes - because construction employs people and gives them the incomes they need to buy houses.

Boosting house prices without boosting wages can’t work. If we build a lot of new homes, and that creates low prices that the construction workers can actually afford, it’s better for governments - think of the property and income tax considerations.

So you can say that boosting building initiatives is an attempt to boost the underlying economy.

Comment on IHB News 11-7-2009 by Brian

Brian — Sat, 07 Nov 2009 17:04:23 -0800

If this place was worth 600k a few months ago, that’s all it is worth now, probably less. These flippers are going to get burned again.

Comment on IHB News 11-7-2009 by no problem!

no problem! — Sat, 07 Nov 2009 14:40:35 -0800

I don’t see these agencies as having problems raising money for the foreseeable future! It’s always been that the Central Bank can print money as needed but now it’s much more apparent and can continue this way for a while. IMHO, the reason for Fannie’s and Freddy’s (and the FHA’s) problems is the housing bubble which inflated property values and put ALL lenders at risk for a steeper fall. Who caused the bubble? I would say many parties but mostly the managers of Wall Street’s shadow banking systems.

Comment on IHB News 11-7-2009 by AbroadThankGod

AbroadThankGod — Sat, 07 Nov 2009 11:30:43 -0800

Lee and Malibu,

Either of you guys going to make it to the block party? I’m trying to get down there from Westwood and you are two of the people I’d like to meet—along with IR and Kirk(!).

Comment on IHB News 11-7-2009 by MalibuRenter

MalibuRenter — Sat, 07 Nov 2009 10:40:10 -0800

Lee,

It is surprising how long insolvent companies (or individuals) can operate. It is not always an indication of irresponsibility, or even of an inability to leave insolvency.

Technically, most recent college graduates are insolvent. They have student loans with only a little principal paid down, and haven’t yet accumulated much in the way of assets.

One of the things most people don’t know about corporate bankruptcy is that larger firms are vastly more likely to file Chapter 11 and try to reorganize. Smaller firms & sole proprietorships make up a much larger portion of those going straight to Chapter 7 liquidation.

There are three distinct things one should look at regarding an insolvent entity. The test of whether their assets exceed liabilities is not the only relevant consideration.

1. Is the firm in positive cashflow? If they are, you probably have a lot of time to try to fix things. Two caveats. If the firm is growing rapidly, but each of its deals is expected to lose money in the long run, it needs to be fixed quickly or shut down. Insurance companies who charge low rates for long term coverage often fit this profile. The FHA might currently fit this profile.

2. On an accrual basis, is the company making money? There are a large number of banks who are currently making money on new business, but watching losses pile up on old transactions. Many of them will survive and prosper, especially those with competent management. Others have severe losses, are putting a positive spin on their losses, or are very sensitive to factor like their own borrowing capacity or cost. They are less likely to survive.

3. Does the company have the ability and the willingness to make changes? This actually applies to governmental entities as well as companies. Some firms just have idiots for managers. A few have criminals for management who are just trying to enrich themselves without regard for the law or shareholders. However, much more common is that the management of an insolvent company doesn’t have the ability or will to make changes. In all three cases management needs to be replaced.

In a few cases, you have good management at insolvent firms. Sometimes they were brought in to fix huge problems which were known before they were hired. Other times, they were brought in and only later realized the mess they inherited, and started to fix it.

The one thing you really don’t want to do with insolvent firms is to supply them with additional money or credit without doing anything to cure whatever got them into their financial mess.

Fannie, Freddie, and the FHA are unusual. Collectively, they are such a large part of the market for housing finance that some people believe the way to improve their solvency is to artificially move housing prices.

While I am not 100% opposed to all steps which might increase home prices, some of the methods being used are quite ineffective, others delay problems, and a few make the problems worse.

What strikes me as by far the largest mistake regarding home prices is that home prices are the result of some fundamental factors which are being ignored. Migration and immigration are being ignored. New construction incentives are being passed, even by state governments which big budget deficits. That is lunacy. The incentives should be to stop construction, or take down existing buildings with problems.

The most basic factor being ignored is that a healthy underlying economy helps support housing prices.

Comment on The Market Sleeps by jimfromJaxFla

jimfromJaxFla — Sat, 07 Nov 2009 10:20:36 -0800

Did you all happen to here George Soros pontificating how our finacial system is broken (thanks for causing that Captain Obvious) and we America needs ” A New World Order, a new finacial Order”
Wonder how this will affect the future Real Estate market…
and we think it’s a Republican and Democrat thing !!!

I read that the $8,000 tax credit costs $47,000 per person.. Is this True ????
Seems there must be some overhead..

Comment on IHB News 11-7-2009 by Lee in Irvine

Lee in Irvine — Sat, 07 Nov 2009 09:46:12 -0800

This found on Calculated Risk, via London Telegraph:

U.K.: Bank of England Warns of “Doom Loop”

On the eve of the G20 meeting of finance ministers in Scotland, Andy Haldane, the Bank’s executive director for financial stability warned that the relationship between the state and banks represents a “doom loop” which will keep inflicting crises on the public unless arrested.

—-This is applicable in the USA too.—-

Mr Haldane, who was a key part of a Bank unit which was among the first to warn, well ahead of the crisis, of a dangerous gap between what banks had in their balance sheets and what they were lending customers ...

I wonder how long the govt is gonna be capable of sustaining the mirage? After all, Fannie Mae is insolvent and looking for more bailout money, Freddie Mac is also insolvent, and will eventually need more bailout money ... then you add the Trifecta over at the FHA, and you have to ask yourself, WTF are they doing? The more money the govt either loans or backstops, the more money they (WE) lose.

I contend that the only way to resolve this debacle, is to allow the excesses to unwind, NOT to restart the scheme.

Comment on Revealed by Chris

Chris — Sat, 07 Nov 2009 09:13:19 -0800

You should be outraged about your math.

Comment on Revealed by Chris

Chris — Sat, 07 Nov 2009 09:09:23 -0800

You mean “Job*loss* recovery”.

I expect to see unemployment number heading higher (and I don’t mean U3 either).

Comment on Revealed by Freetrader

Freetrader — Sat, 07 Nov 2009 08:29:31 -0800

No, IR knows exactly what is going to happen in the future. He has a crystal ball and only writes this blog to torment mortals like you while he secretly trades on his supernatural prescience.

Comment on IHB News 11-7-2009 by ME

ME — Sat, 07 Nov 2009 08:09:59 -0800

&@$”@&@” flipper.

Comment on Revealed by was there a bidding "war"?

was there a bidding "war"? — Fri, 06 Nov 2009 21:44:45 -0800

It sounds like it was a smooth transaction. Did you have to go into a bidding “war”?

Comment on Revealed by priced_out

priced_out — Fri, 06 Nov 2009 20:19:08 -0800

It’s a little bit of a bear market rally, a lot of bit of government intervention in the housing market. The Fed spent $300 Billion this summer buying Treasury T-Notes. (The government is buying up its own debt—that doesn’t make much sense to me.) This gives the appearance of high demand for the T notes, and keeps their yield low.

The yield on the T note sets interest rates for tons of other things.

Interest rates are low enough that insanely high asking prices are actually affordable. People can bid on houses and get fixed rate mortgages without breaking the bank. This creates the illusion of a bottom.

The illusion of a bottom pulls in lots of would-be buyers who were sitting on the sideline.

The kool-aid didn’t stop flowing long enough for people to stop looking at housing as an investment. It makes me sad to see people buying houses now. The government protected the US populace from having to learn from its mistakes.

...

The $300 Billion have been spent, and I haven’t heard anything more about an extension to this program. I think the program ended about a week ago.

Accordingly, interest rates should start rising again, right? Is there any sign that they are starting to creep up?

Comment on Revealed by zovall

zovall — Fri, 06 Nov 2009 20:16:58 -0800

Congrats!

Comment on Revealed by priced_out

priced_out — Fri, 06 Nov 2009 19:58:15 -0800

Hi E,

Case-Schiller is price-tier insensitive because it looks at resale values of houses. House X sells for $500K in 2002, and then that very same house sells again for $800K in 2009. It’s not just that more expensive houses are selling.

Comment on Revealed by whatever

whatever — Fri, 06 Nov 2009 18:36:35 -0800

Thanks everyone! I am a little freaked out but I think it is a good decision. I just need to focus on the quality of life and not on the $$

Comment on Revealed by WaitingToBuyByAndBy

WaitingToBuyByAndBy — Fri, 06 Nov 2009 18:11:29 -0800

I would humbly suggest viewing the LA/OC chart IrvineRealtor posted above in its entirety (View image from your web browser).

Then look at the range Jan-90 to Sep-91 and compare against Jan-07 to present.

My point, absurd as it may sound, is that we are looking at the bear rally before the actual correction.

Comment on Revealed by Sue in Irvine

Sue in Irvine — Fri, 06 Nov 2009 17:09:11 -0800

Congratulations whatever!

Comment on Revealed by thrifty

thrifty — Fri, 06 Nov 2009 16:39:08 -0800

IR2
Do I understand you to simply be saying, essentially, that today we’re here; I have no idea where we’ll be in the future?

Comment on Revealed by norcal

norcal — Fri, 06 Nov 2009 16:28:34 -0800

Wow, you made the leap! Now the important thing for you is to ignore house prices, live happily in your townhome for as long as you can, and enjoy the free space in your head opened up by NOT being in the market.

Congratulations!

Comment on Revealed by IrvineRealtor

IrvineRealtor — Fri, 06 Nov 2009 16:08:27 -0800

Thrifty and E -

I’m sorry if I wasn’t clear… those histograms are graphical representations of the data that Robert Schiller’s group publishes, as referenced by Larry’s “I am terribly conflicted” link from Mr. Schiller.

I don’t make assumptions about where the reset will be, when it will be, or how long it will last. I’m providing the data in hopes of clarifying what the issue is, and let people decide for themselves.

My ego is not too big to admit that I don’t know.

...but a point of clarification - the data are tied to same house selling now vs when it sold in the past, and not median pricing. So the increase in index value is real, and compares apples-to-apples as best as I’ve seen measured for a macro view. Their methodology
and FAQ can be found here.

Thank you, -IR2

Comment on Revealed by Geotpf

Geotpf — Fri, 06 Nov 2009 15:26:15 -0800

Congratulations on your purchase.

Comment on Revealed by E

Fri, 06 Nov 2009 14:56:03 -0800

How unfair. You can’t ask a realtor a question where one must apply logic and intelligence.

Comment on Revealed by E

Fri, 06 Nov 2009 14:43:49 -0800

The data shows that nicer houses are now being let out of the foreclosure corral. You know…the NON subprime toxic loan centers.

Nicer houses sell for more (also measured by $psf) than shitty ones.

Gee…who would have guessed?

Comment on Revealed by Lee in Irvine

Lee in Irvine — Fri, 06 Nov 2009 14:42:13 -0800

Only confirms my belief, that something is terribly wrong with our economy.

When this ends, the way I know it will, there are gonna be a lot of pissed off people. The idiots in our govt will be more concerned with public stability than the banks.

Comment on Revealed by whatever

whatever — Fri, 06 Nov 2009 14:05:39 -0800

Forgive me Irvine Renter, I have sinned: I bought a townhome (okay, legally a condo) in Irvine.

I was renting. I was prepared to rent for a while. I wasn’t even looking, but I stopped by a “realtor open house” one day while driving around, and WOW. I thought, eh, can’t afford it anyway. Looked down and WOW. Plugged through the rental parity worksheet and it is close, close. I even went around the next day and looked at a few housing rentals, and the fact was this house was loved and maintained and move-in ready. Rental housing is run by a lot of people who just slap on paint when the old guys move.

So maybe I am contributing to the froth - while the house was “a good deal” by Irvine standards, it is still insane in 99% of the rest of the country. But I couldn’t help it. And I had 20% to put down….

Comment on Revealed by freedomCM

freedomCM — Fri, 06 Nov 2009 12:29:48 -0800

Where is IPO’s CS data? Has he taken a break?

Thanks IR2!

Comment on Revealed by thrifty

thrifty — Fri, 06 Nov 2009 12:29:15 -0800

I apologize for the triple post - got messages that they might be spam on the first 2 tries.

Comment on Revealed by thrifty

thrifty — Fri, 06 Nov 2009 12:27:22 -0800

Question for Irvine Realtor:
Assuming median income of $99k and median home price (condo and sfh) of $575k in Irvine, are you saying that there is now a reset of price/income ratio of about 6/1 in Irvine - vs time tested
3-3.5/1 ?
If so, what are your figures for the below parameters for a 30 yr fixed interest loan on an Irvine property:
1. interest rate?
2. down payment?
3. FICO score
4. DTI ratio

Comment on Revealed by thrifty

thrifty — Fri, 06 Nov 2009 12:20:10 -0800

Irvine Realtor: Are you saying that there now exists a long term reset of 6/1 price/income ratio (from the time tested 3-3.5/1) -
Assuming Irvine median income $99k and median home price (sfd and condo) of $575k?
If so, what are your assumptions for a bank loan with 30 yr fixed interest rate regarding the following parameters:
1. interest rate?
2. down payment?
3. FICO score
4. DTI ratio

Comment on Revealed by Lucky Victim

Lucky Victim — Fri, 06 Nov 2009 12:14:40 -0800

That article gave me shivers.

Comment on Revealed by thrifty

thrifty — Fri, 06 Nov 2009 12:13:44 -0800

Irvine Realtor: Please clarify a point: you’re saying that there has been an essentially long term (say at least 5 years) reset in the historical ratio of price/income of 3-3.5/1 to a revised 6/1 (or more)?
(based on estimated median family income in Irvine of $99K and median home price (single and multi) of $575k)
Assuming a “yes” answer, what are your assumptions about bank lending parameters for a 30 yr fixed interest loan regarding:
1. interest rate
2. minimum down payment
3. FICO credit score
4. DTI ratio of applicant
to the purchaser?

Comment on Revealed by succeeded here, failed somewhere else

succeeded here, failed somewhere else — Fri, 06 Nov 2009 12:11:09 -0800

If that is the policy, then I would say that they succeeded somewhat in the coastal areas of California (with not so jumbo loans reqirement) but failed big time in other places like most of the Inland Empire, not to mention Stockton, Vegas, Florida, Detroit…etc.

Comment on Revealed by zubs

zubs — Fri, 06 Nov 2009 12:01:58 -0800

Here are the bank stress test scenarios:

Baseline scenario
Economy—Shrinks by 2 percent (adjusted for inflation) in 2009 and grows by 2.1 percent in 2010.
Unemployment—Averages 8.4 percent in 2009 and 8.8 percent in 2010.
Housing prices—Drop 14 percent in 2009 (from where they ended December 2008) and drop 4 percent in 2010 (from December 2009).
More adverse scenario
Economy—Shrinks by 3.3 percent in 2009 and grows by 0.5 percent in 2010.
Unemployment—Averages 8.9 percent in 2009 and 10.3 percent in 2010.
Housing prices—Drop 22 percent in 2009 (from where they ended December 2008) and drop 7 percent in 2010 (from December 2009).

http://www.bankrate.com/finance/savings/what-are-bank-stress-tests-1.aspx

Comment on Revealed by LongTime Reader

LongTime Reader — Fri, 06 Nov 2009 11:49:32 -0800

Back in February Berkeley and UCLA had a Symposium on the Mortgage Melt Down with Ben Bernanke, the head’s of the regional federal banks, and other real estate players.

Basically, there plan was to put a floor under prices to keep people from walking away.

You can listen to the symposium by going to the itunes store and then UC Berkeley > Business - UC Berkeley - UCLA symposium.

Comment on The Market Sleeps by Best CD Rates

Best CD Rates — Fri, 06 Nov 2009 10:55:41 -0800

I like the way you presented your views. This is simply great. In addition I would say you have portrayed a co-relation between lions and real estate which is out of imagination. Keep the good work going.

Comment on Revealed by tacoshark

tacoshark — Fri, 06 Nov 2009 10:54:15 -0800

So short sales are picking up?

Comment on Revealed by IrvineRealtor

IrvineRealtor — Fri, 06 Nov 2009 10:36:37 -0800

What the data are showing:

-IR2

Comment on Revealed by tenmagnet

tenmagnet — Fri, 06 Nov 2009 10:12:19 -0800

36 months from default to listing, what took so long?
It’s an outrage!

Comment on Revealed by newbie2008

newbie2008 — Fri, 06 Nov 2009 09:57:23 -0800

Lee, Looks like with jobless recoveries, the stock market really likes that with increasing prices of goods, increasing profits, and depressing wages. Looking back over the Carter years, the unemployment was lowing with inflation, but people saw that as the worse of times. Reagan year initally had higher unemployment, but higher stock market. Is B.O. trying to repeat Reagan, but needs a little bit of inflation instead of the current deflation in housing? In general, Americans think the stock market is a gauge on the health of Main Street. The stock market is a gauge on Wall Street (reality or delusions) and not Main Street.

IrvnineRenter, Was the 7/07 Notice of Rescission an indication of refinancing or loan modification? If so, the cure only lasted 2 months. Was that 2 months cure, because of a prepayment included in the loan?

Comment on Revealed by IrvineRenter

IrvineRenter — Fri, 06 Nov 2009 09:49:53 -0800

Robert Shiller is losing his certainty on what is happening with housing market prices due to government manipulation.

Shiller on Housing: ‘I am Terribly Conflicted’

“This morning Robert Shiller, Yale professor and co-creator of the S&P Case-Shiller Home Price Index, joined me. It was a fascinating interview. I’ve never seen the professor this way. He was incredibly uncertain about the future. Incredibly conflicted about where we are headed. What made today’s interview with Professor Shiller so intriguing is that he’s one of the leading economists who predicted the asset bubble in the stock market and in housing. In fact, he said the housing bubble was inextricably linked to the finance world. He was right!

Today it was clearly visible that the historical data he looks at to predict the future is not working. The current appreciation in housing and other economic indicators are not what the models would suggest. Time and time again he said “this is a time of great uncertainty.” He’s clearly puzzled by the rapid appreciation in home prices while disturbed by the “bail out economy” and the national deficit. He admitted, “Things seem to be working right now but we’re in a GRAND experiment.” I found it incredibly telling.

At one point I said, “You seem so conflicted.” He said, “I am terribly conflicted. This is the most uncertain time that I can remember. Things are violating the laws that I learned. The turn around in real estate is so dramatic. The whole country is experiencing an upsurge but I don’t know what to make of it.”

Take a look at our interview. When the best admit they don’t know, there is reason to believe we are in unchartered territory.”

Comment on Revealed by AZDavidPhx

AZDavidPhx — Fri, 06 Nov 2009 09:41:02 -0800

It’s a great example of what I am always reminded of the late George Carlin’s “American Okie Doke” describing “Bullshit” as the “glue” that holds this place together.

Everybody running around bullshitting one another for their own personal gain.

One big stroke job.

Comment on Revealed by OCRefugee

OCRefugee — Fri, 06 Nov 2009 08:41:25 -0800

Thanks for reminding all of us how stupid we are.

Comment on Revealed by AZDavidPhx

AZDavidPhx — Fri, 06 Nov 2009 08:22:55 -0800

Jobless recovery people! Stop trying to “talk down” all the leaps and bounds that we have made this year on the path back to prosperity and McMansions with granite counters for all!

Comment on Revealed by AZDavidPhx

AZDavidPhx — Fri, 06 Nov 2009 08:18:46 -0800

There is no Shadow Inventory, Geotpf. Activity is up! Remember?!

Comment on Revealed by AZDavidPhx

AZDavidPhx — Fri, 06 Nov 2009 08:15:19 -0800

There is no Shadow Inventory - Geotpf just said so yesterday and proved it with flawless ‘Just because’ logic.

Your example proves nothing.

Repeat after me: “No Shadow Inventory”. Ist makebelieve a hoot?

Comment on Revealed by Geotpf

Geotpf — Fri, 06 Nov 2009 08:09:52 -0800

Now, that is an actual example of (now former) shadow inventory. Of course, it’s quite possible there were legal entanglements (former owner fighting the foreclosure, for instance) that prevented the bank from listing the property until now. It also looks like the house needs a new roof, which the bank is now installing. The bank might have been debating whether or not to pay for it, although 15 months is extreme.

As for why Riverside County is cheap-it’s because the commute on the 91 is a bitch, and there are only so many jobs out here. The smog and the heat don’t help. However, lots of people were priced out of the OC, and so they moved out here. The builders saw all the empty land, and the high (temporary bubble) demand, and overbuilt. But people who rent tend to be people who can’t buy (college students, people with poor credit, unstable income, and/or no down payment), and there tend to be more of those types of people in poorer areas than in richer areas such as Irvine. I think it’s funamentals, that is, not manipulation. If fact, the government is trying to manipulate prices higher, not lower.

Comment on Revealed by IrvineRealtor

IrvineRealtor — Fri, 06 Nov 2009 08:02:59 -0800

Updated MLS Irvine Closed Sales through October 2009 at www.irvinerealtorsite.com.
(previous years are at tabs at the bottom)

- I show 206 closings for October, resale (6.65/day).
- Mortgage info has not yet been updated.
- October median price for Irvine is in at $582,500, back up from September’s $539K median.
- 28 were short sales (14% of total sales).
- 17 were REO sales (8% of total sales).

As a refresher:
Yellow is still unconfirmed (no data reported yet)
Blue is “suspicious” even though it is recorded.
Green is confirmed.

Closed lease info has been updated through October, as well. 172 leases, prices edging slightly up again to $1.58/sqft. average.

Floorplans have all been uploaded, including new homes in Woodbury and Woodbury East.

Thank you again, and be sure to drink your Ovaltine!
-IrvineRealtor

Comment on Revealed by Lee in Irvine

Lee in Irvine — Fri, 06 Nov 2009 07:25:14 -0800

The govt just released the nations job figures ... not good ... the US unemployment rate is now 10.2%. That’s a multi-decade high.

If you remember correctly, when the govt completed the stress test on the banks this past spring, the most adverse scenario was an employment rate exceeding 10.3%. Well, it took 6 months to reach that level. I can’t help but believe the (zombie) banks are gonna come begging to DC again.

I think we’re gonna see another crash in the stock market within the next few months. Investors are once again being set up, and told by the talking heads on Wall Street, to ignore the obvious, and concentrate on the forward looking market.

Comment on Revealed by Freetrader

Freetrader — Fri, 06 Nov 2009 03:56:49 -0800

Oh, Vey! So the bank has been sitting on this house for 15 months now, and it has been a dead asset Christmas 2006? Yikes. That’s 36 months from default to listing. I am a believer in the big bath theory of cleaning up financial messes, so it is good to at least see this property on the market, but your question remains—how many more properties like this are going to have to be dumped on the market before we get back to anything resembling “normalcy”?

Comment on The Market Sleeps by Freetrader

Freetrader — Fri, 06 Nov 2009 01:22:32 -0800

If he hadn’t been caught with a prostitute, Spitzer would still be the governor of New York, so your comment is simply nonsense. Spitzer was an awesomely hypocritical individual who was hoist on his own petard. The validity, or lack of validity, of his positions is a completely different issue.

Comment on The Market Sleeps by badcandy

badcandy — Thu, 05 Nov 2009 23:55:34 -0800

It’s relatively anonymous, there are no names/photos of the people involved, just the property. Honestly, if it bothers you that much, don’t read the blog.

As to why I’M angry… well, after looking at mortgages in the UK and being shocked that they don’t OFFER fixed rate 30 year mortgages (they’re *all* 2/28, 5/25 etc ARMs) because back in MY country, we recognize the DANGERS of ARMs so we protect the citizenry from the evil banks… I moved back to the states only to find that while I was gone everyone went crazy over here and threw common financial sense out of the window! 3-4x your income wasn’t good enough anymore, had to go 5-8x. When I told the mortgage broker that someone insisted I talk to that I only wanted 400k in mortgage, she said, ‘what kind of house can you buy with that?’ I had 3 years of people telling me how STUPID and FOOLISH I was to be renting, and god knows maybe they were right, as the IAC is raking me over the coals for 2775 for month-to-month and I could be living in a bigger place RENT FREE and only sacrifice my credit score.

The interest rates are devastating to my retired in-laws, and it’s infuriating to me to see CD rates under 2%. We’re getting slapped around for being financially responsible and saving money for the future.

It’s hard NOT to be angry.

Comment on The Market Sleeps by Freetrader

Freetrader — Thu, 05 Nov 2009 23:53:26 -0800

Actually PRC is the biggest foreign Treasury holder. The biggest Treasury holder, though, is the US government and its citizens. The current recession has changed American savings patterns: instead of spending they are saving. Their saving is making up for the decreased purchases of Treasuries by foreigners (e.g., the PRC) and allowing US citizens, not foreign citizens, to pay for the current fiscal stimulus.

The Japanese alternative is more instructive, I think, but Japan has so many other problems, including a shrinking and aging workforce, that it is unlikely that we are entering into a decade or more of stagnation like the Japanese have experienced. It is true, though, that one of the reasons for the Japanese lost decade was an unwillingness to accept the pain - a risk that we are running by trying to forever extend out the deadbeat default date.

Comment on The Market Sleeps by IrvineRenter

IrvineRenter — Thu, 05 Nov 2009 23:35:46 -0800

Thank you. It is comments like your that keep me going.

Comment on The Market Sleeps by newbie2008

newbie2008 — Thu, 05 Nov 2009 22:46:55 -0800

If bank get money for 0.25%. Very sweet for the banks at the taxpayer expense. The bank will need to pay for property taxes, repairs, upkeep, and management fees. That will be 5 to 6% lower than the typical non-owner occupied investor.

Comment on The Market Sleeps by Geotpf

Geotpf — Thu, 05 Nov 2009 22:35:35 -0800

You didn’t say bank owned. Lots of people include non-bank owned properties as shadow inventory; I assumed you were as well, because you didn’t say you were limiting it to it.

Look, sometimes a bank owned property has a former owner who fights the foreclosure. That’s not the bank’s fault; that’s not shadow inventory. The properties always need a couple months to clean, repair, list with an agent, and otherwise prepare the properties for sale. That’s not shadow inventory.

Shadow inventory is when a bank forecloses on a propetry and then does nothing with it for a long period of time, even if they could. My take is that this never, or almost never, happens.

Comment on The Market Sleeps by MRexpert

MRexpert — Thu, 05 Nov 2009 22:25:50 -0800

Had a meeting with a very well knwn development company recently re starting a project with CFD financing. I was trying not to fall out of my chair hearing them talk about the bottom has already happened and from now on it’s on the up and up.

ironically, I rcvd this press release from the NAHB today:

WASHINGTON, Nov. 5 - The National Association of Home Builders (NAHB) today applauded Congress for passing legislation that will extend and expand the $8,000 first-time home buyer tax credit, stating that this will provide a much-needed boost to the fragile housing market and economy.

“We commend lawmakers for acting in a bipartisan manner to extend the first-time home buyer tax credit beyond its Nov. 30 deadline and expand it to a wider group of home buyers,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “The tax credit has proven to be a powerful economic incentive. Today’s action by Congress will further stabilize housing and the economy by creating new jobs, stimulating home sales, reducing foreclosures, cutting excess inventories and stabilizing home prices.”

The new law will extend the $8,000 credit for first-time home buyers for sales contracts entered into by April 30, 2010 and closed by June 30. Further, it has been expanded to include a new $6,500 credit for owners of existing homes who are purchasing a new principal residence. An existing home owner can claim the $6,500 tax credit if they have been residing in their principal residence for five consecutive years out of the last eight. Additionally, the income eligibility limits to claim the full credit amount for both groups of home buyers have been raised to $125,000 for individuals and $225,000 for married couples.

NAHB estimates that the extended and expanded home buyer tax credit will create 211,000 jobs and generate 180,000 additional home sales in the coming year. It is also expected to generate $9.6 billion in wage income and $6.9 billion in federal, state and local taxes.

The legislation, which also extends unemployment insurance benefits and offers relief to cash-strapped firms by providing broader tax benefits for businesses with net operating losses (NOLs), is expected to be signed into law shortly by President Obama.

“The new NOL rules will throw a lifeline to struggling businesses, allowing them to continue making payrolls, paying business loans and otherwise keep their doors open until the economic recovery takes hold,” said Robson.

Comment on The Market Sleeps by tkaratz

tkaratz — Thu, 05 Nov 2009 22:03:28 -0800

thank you

Comment on The Market Sleeps by thrifty

thrifty — Thu, 05 Nov 2009 21:22:44 -0800

I think that if leasing until sold worked, banks would have been doing it for decades. More than one experienced realtor has stated that is the last thing banks want to do. They will have to pay for managing - collections, repairs, maintenance, etc. Do renters take care of a house and always have it in shape to be shown? And why would they be able to afford making payments after one year that they can’t make now - are raises guaranteed for all these millions of people who can’t afford teaser rates?
The leasing program is doomed at the start.

Comment on The Market Sleeps by thrifty

thrifty — Thu, 05 Nov 2009 21:16:31 -0800

Sure sounds straight forward and predictable. You’ve put my mind at ease.

Comment on The Market Sleeps by Chris

Chris — Thu, 05 Nov 2009 20:46:26 -0800

Guess what? PRC is NOT the biggest Treasury holder.

Rates will remain low even if foreign central banks decide otherwise.

There will be no hyperinflation because there is no longer any possibility of wage/price spiral like we’ve seen in the 70s/80s.

Please do not compare us with Zimbabwe. That country cannot even be self-sufficient if it wants to. We have proven we can during WWII.

My only uncertainty is the comparison between us and Japan. Frankly, Americans DON’T SAVE (as proven in the freeloaders scenario).

Comment on The Market Sleeps by Chris

Chris — Thu, 05 Nov 2009 20:35:29 -0800

Tell me then: why are bank owned inventories that are listed on Foreclosureradar.com dropped off after a while?

Answer: because banks can and will do so after concocting our very own gubbermint to rig the rules favoring them. Mark-to-fantasy GAAP accounting has favor them into valuing the inventories/mortgages higher than the **current** market value while simultaneously selling the higher valued mortgages to the Fed (unloading them to us, the taxpayers).

Even if the Fed stops buying them from the banks, Mark-to-fantasy can keep them inflated.

The real question is cash flow: I guess that question has been answered by the Fed pumping billions into banks coffer.

Comment on The Market Sleeps by Chris

Chris — Thu, 05 Nov 2009 20:23:50 -0800

Yes, there are no shadow inventory in Irvine.

And, yes, there are UFOs.

I’ll take the latter bet, thank you very much.

Comment on The Market Sleeps by Chris

Chris — Thu, 05 Nov 2009 20:18:21 -0800

“For the most part, loan mods are a complete joke. They will benefit only a fraction of the people who need them. For most people who are hopelessly underwater, this is just another stall tactic to live rent free for two years on the tax payer dime.

THIS DISGUSTS ME!!!!!!!!!!!!!!! “

I’ve been saying this since this bear market rally.

It’s not fun watching the freeloaders wait for FC while renters like those that are frequent IHB readers pay rent on houses/condos/apt (fortunately, I’m no longer in US but will have the future unfortunate situation of returning because of kids’ education).

And people wonder why retail sales are going up when we’re facing record amount of NODs and NOTs? Look no further than the freeloaders that are **suppose** to use the money for ‘motgage’/prop tax/HOA and what not on Cash for Clunkers, etc.

After all, you need to look good in a Mercedes while being thrown out of your freeloading shack

Comment on The Market Sleeps by Lee in Irvine

Lee in Irvine — Thu, 05 Nov 2009 20:08:23 -0800

Why so angry?

BECAUSE WE DISAGREED WITH ALL THE BULLSHIT ASSOCIATED WITH THIS BUBBLE ON THE WAY UP! AND WE DISAGREE WITH ALL THE BULLSHIT ASSOCIATED WITH THIS BUBBLE ON THE WAY DOWN! The quicker it’s over, the better off we’ll all be.

That’s why we’re angry!

Comment on The Market Sleeps by norcal

norcal — Thu, 05 Nov 2009 20:01:45 -0800

Even more news from Calculated Risk - Fannie Mae is asking for permission to initiate a “deeds to lease” program. If you’re in default, your lender can take the property then lease it out to you at market rates for a year. After that the lease is renewed, or goes on month-to-month basis, and if the bank/ex-lender/owner sells the property, the lease is sold with it.

So this keeps people in homes, but not for free - they at least have to pay rent to the bank, which is probably a good thing. The bank keeps the property until it can sell at lower/sustainable prices - probably wreaks havoc on the bank’s books, but that was going to happen anyway.

Good or bad? What do you think?

Comment on The Market Sleeps by Modguy

Modguy — Thu, 05 Nov 2009 19:58:59 -0800

Norcal,

yes, principal reduction is often thrown around as a “solution”.

First of all, do you realize what kind of reduction is required to “lower” an already artificial low option arm payment? Probably half the balance. I’ve run numbers on this.

Second, most lenders (including where I’m at) will NOT forgive principle. We might, however, “defer” principle which means you don’t pay on that part, it just sits on the side to be paid back when you refi or sell in the future - which is just kicking the can down the road.

Finally, if the govnm’t forces principle reduction, then I hope people take to the streets and riot. How is it fair that an iresponsible liar-loan borrower that chose an exotic/toxic mortgage gets his balance cut in half, while you the responsible neighbor still owe twice on your home next door. Then, when they sell in the future, they walk away with a windfall? Or, what if they took out hundreds of thousands in cash-out (and you didn’t), and his balance is “forgiven”? Is SEARS going to cut the balance on the patio set I charged last year, since it’s worth less now?

Principal reduction is a bad idea, a real moral hazard, and will lead to catastrophic “unintended” consequnces.

NO MORE BAILOUTS!!

Comment on The Market Sleeps by Pissed in Pennsylvania

Pissed in Pennsylvania — Thu, 05 Nov 2009 19:58:43 -0800

I’m fed up. Let’s put these scummy bastards in debtor’s prison, and give their spiffy houses away to HUD. If it wasn’t for the sand states, the rest of us would be still doing just fine.

Oh yeah. Let’s send pitchforks and burning torches to go after the likes Barney and Chris and Timmy and Hank and Helicoptor Ben and Angelo and that moonbat Attorney General.

And and and and

Eventually we should get clear of this, but California must slide into the sea.

I’m pushing, you need to get out of the way or help.

Comment on The Market Sleeps by Freetrader

Freetrader — Thu, 05 Nov 2009 19:53:53 -0800

“I for one welcome our new Communist overlords”.

One quick comment about this. The housing bubble and the resulting credit crunch were caused just as much by the PRC as by Wall Street or the Fed. The PRC’s government policy is to support its export sector and build up industry and infrastructure. In the normal course of events, trade flows would force the US dollar to depreciate, making US exports cheaper and Chinese ones more expensive. To prevent this, the PRC ties its currency to the US dollar, in effect undervaluing it. The US treasury debt they collect is the price of this strategy.

So, I wouldn’t worry about the PRC refusing to buy treasuries—to let the Yuan float, they will lose their biggest export market. BTW, the Chinese are already under pressure from Mexico which is a lower cost provider. In effect, the Chinese tactic of fixing their currency against the dollar is a bit like a bank’s modification of its loan rates—simply putting the pain off to a later date. Sometimes that tactic pays off, sometimes it doesn’t.

Comment on The Market Sleeps by norcal

norcal — Thu, 05 Nov 2009 19:34:41 -0800

RoLar,
My reason for thinking prices are inflated is that they are not supportable given the median income. If the median income in Irvine is indeed $100K, that supports a median house price of $380K. Ratios above that are not sustainable without wierd financing and hyper-easy credit. And if we’ve got rising unemployment and falling income, then even $380K is not likely to work.

If you disagree with this data, by all means go out and buy a house now, with my blessing. But the foolish activity of many others does not mean that the activity is necessarily wise. Why join it?

Comment on The Market Sleeps by norcal

norcal — Thu, 05 Nov 2009 19:25:56 -0800

Well, let’s not forget that the rest of the country would also be bailing out Arizona, Nevada and Florida.

These states represent what, 30% of the national population? So it’s arguably in the national interest. To say nothing of all those poor banker dudes eeking out a living on Wall Street - we’re helping them out, too!

High feel-good factor.

Comment on The Market Sleeps by norcal

norcal — Thu, 05 Nov 2009 19:23:01 -0800

Hi IR. Obviously, by portraying yourself as a trustworthy person who wouldn’t sell worthless properties to someone unless that someone ABSOLUTELY INSISTED on buying them, you compel, yes, compel, everyone to buy through you.

Sheesh. What an obvious ploy.

(Please note that this comment has a snark content of about 75%.)

Comment on The Market Sleeps by norcal

norcal — Thu, 05 Nov 2009 19:13:42 -0800

Hi Modguy. If you read Dr. Housing Bubble’s most recent post, he includes a letter from the AG to the Option ARM banks asking them to describe their actions forestalling foreclosures by Nov. 30 (I think), and if they have no actions to describe, to explain why.

He also hints in this letter that it would behoove them to lower the principals. Good luck with that. Don’t know if he has any power to compel.

Comment on The Market Sleeps by AZDavidPhx

AZDavidPhx — Thu, 05 Nov 2009 19:04:50 -0800

After that the govt support will be phase out

LOL!!!!!!!!

Keep telling yourself that!

Comment on The Market Sleeps by AZDavidPhx

AZDavidPhx — Thu, 05 Nov 2009 19:03:32 -0800

Which is expected to decrease Q2 of 2010

LOL!!!!!!!!!

Tell us more, Nostradamus!

Comment on The Market Sleeps by AZDavidPhx

AZDavidPhx — Thu, 05 Nov 2009 18:58:19 -0800

By that definition, every property on the planet is shadow inventory.

I thought we were talking about bank owned homes and the pending Option-ARM implosion.

Why are you acting confused? Have no argument and trying to go off on a tangent, perhaps?

Comment on The Market Sleeps by RoLar_USC

RoLar_USC — Thu, 05 Nov 2009 18:42:37 -0800

The govt aid is a short term solution until other economic factors ease, like unemployment for one. Which is expected to decrease Q2 of 2010. After that the govt support will be phase out

Comment on The Market Sleeps by thrifty

thrifty — Thu, 05 Nov 2009 18:30:14 -0800

RoLar: Where do you think the trillions of dollars are coming from that are causing this turnaround you describe? It’s all loans from the government. What happens when the loans stop? When the Fed stops buying troubled mortgages?
And where will the repayment of the govt loans come from? I can only think of one place - taxpayer pockets.
I look forward to your posts after the govt stimulus ends. Til then, it’s premature to make any long term prediction regarding regaining economic health.

Comment on The Market Sleeps by EconRules

EconRules — Thu, 05 Nov 2009 18:27:25 -0800

IR, I’m glad you’re not doing this blog to be popular. Keep preaching the truth; I for one appreciate it.

Comment on The Market Sleeps by RoLar_USC

RoLar_USC — Thu, 05 Nov 2009 17:40:13 -0800

Ok okay smart guy. Address my points next time… Unemployment is slowing, close to the peak. Will RE not turn around when unemployment does? Are you saying my statistic are wrong on activity? Or are you justnot going to touch that? Please try to say something useful

Comment on The Market Sleeps by bltserv

bltserv — Thu, 05 Nov 2009 17:14:58 -0800

Rolar just keep chanting “Activity is up”.

This housing market is like a tsunami. The first wave has come and gone. Now the next couple of waves are heading our way. Until Unemployment and the Commercial market recover. Residential will trail and continue its slide. Population is not increasing either. The RE business model in California is very broken in almost every way it could be.

Now continue your Cheer Leading efforts.

Comment on The Market Sleeps by wheresthebeef

wheresthebeef — Thu, 05 Nov 2009 16:50:35 -0800

I should have clarified my point. Relative to historic norms, renting is currently far cheaper than owning.

I will once again own, when the rent to own ratio gets smaller.

Comment on The Market Sleeps by Geotpf

Geotpf — Thu, 05 Nov 2009 16:26:12 -0800

In general, renting is a better deal than owning in expensive areas and owning is a better deal than renting in cheaper areas. This is nothing new.

Comment on The Market Sleeps by Geotpf

Geotpf — Thu, 05 Nov 2009 16:07:47 -0800

It’s quite possible that a lot of the pre-shadow inventory (properties behind on the payments but not yet foreclosed upon) will self-cure (arrange a short sale, arrange a loan mod, or pay what is owed).

As for actual shadow inventory-it doesn’t exist. Banks are not sitting on foreclosed properties en masse after they have foreclosed on them. It simply isn’t happening. Most foreclosures turn into listed REOs within three months or so, and the ones that don’t usually have good reasons to not be resold immediately (major repairs in process, unresolved legal issues, etc.).

Comment on The Market Sleeps by Geotpf

Geotpf — Thu, 05 Nov 2009 16:01:03 -0800

That is the definition of shadow inventory : properties not on the market RIGHT NOW but will be in the future

By that definition, every property on the planet is shadow inventory.

Comment on The Market Sleeps by Geotpf

Geotpf — Thu, 05 Nov 2009 15:58:52 -0800

Yeah! We can bomb some more Muslim countries at random!

Comment on The Market Sleeps by RoLar_USC

RoLar_USC — Thu, 05 Nov 2009 15:03:47 -0800

No rant. It is slightly upsetting, but nothing new. Bail outs happen everyday, and the government has set up a number of programs that bail out individual constantly. I’m about as upset with mortgage abuse as I am with unemployment benefits, increasing minimum wage, and etc… Especially last week when I heard about a movement to give illegal workers minimum wage, enforcable by law.

But, there’s a difference between being upset and being angry and acting like a child about it by making post after post about individual people who are underwater on their home.

Plus, I think a number of people, whether they admit it or not, are angry because they did purchase and have lost their home.

Comment on The Market Sleeps by wheresthebeef

wheresthebeef — Thu, 05 Nov 2009 14:52:14 -0800

Rolar_USC,

I previously owned a house and now rent. I think renting will be a much better deal than owning for the foreseeable future. I would love to own again…but only if prices come back to a reasonable level.

The reason you see such anger on this board is because many people didn’t participate in the party, but they are forced to pay for the clean up (like IR said). Now the government is doing everything possible to delay the inevitable. We hear people HELOCing hunderds of thousands of dollars from their house and then walking because the ATM machine won’t give anymore. People not making a mortgage payment for years and still living in their house. People who signed up for suicide loans and are now be offered 2% rates. This should piss off any responsible person.

Like I said, I would love to own a house today. The greed, fraud, corruption, stuipidity we have seen in the last decade will prevent me from doing so anytime soon.

Rant off!

Comment on The Market Sleeps by RoLar_USC

RoLar_USC — Thu, 05 Nov 2009 14:46:31 -0800

It was bearish. For the past 6 months strong, it’s been pretty positive. I read the bullish section, but it was followed by reasoning why it’s not enough… so is it really a bullish section?

Right now, all the perma-bears are still holding on tight to their shadow inventory reasoning because when it comes down to that’s all you have now. And there’s no way to prove it or determine where will it will lead, so its a way to hide behind the unknown and that what cannot be proven. That’s why your posts each week lose more and more data and relevance, and you’ve resorted to these “Look at this idiot” posts, where you just try to put down people who bought a house during the bubble.

Activity is up at its peak for the past 3 years, and 20% off the peak in 2005, and it’s NOVEMBER. Interest rates are low and will remain low for AT LEAST 6 months, probably another year. Unemployment is slowing and near the worst it’s going to get. And, 9 months later there’s still no sign of this wave of REOs.

Comment on The Market Sleeps by AZDavidPhx

AZDavidPhx — Thu, 05 Nov 2009 13:56:33 -0800

Of course it was extended. And now the predators are going to cast an even wider net this time.

How much more money can they spend to keep the music going just one election longer?

Your tax money being spent to keep your house debtor neighbor above water and not walking away.

How long can they keep it up? Maybe we can just double the credit every year from here on out.

Comment on The Market Sleeps by IrvineRenter

IrvineRenter — Thu, 05 Nov 2009 13:55:02 -0800

Many people are angry because they did not participate in the madness, yet they are being asked to pay for the party.

Perma-bear post? I report the action as I see it. It has been nothing but bearish for the last few years. BTW, did you not read the bullish market conditions I identified in the post? You just like to come here and make perma-bull comments because you want to believe the market is rosy, and you want others to believe it. You will enjoy this blog much more in a couple of years when the market gives us reason to be bullish.

Comment on The Market Sleeps by RoLar_USC

RoLar_USC — Thu, 05 Nov 2009 13:32:08 -0800

And to top things off, I’ve been asking myself this for some time now. Is everyone in Irvine as angry at the world as the people on this forum? (not everyone) Post after post, on the forum and especially this blog, all I read is about people who have lost money over the past 4 years. Going as far as pointing out how much money they put down and exactly how much money they have lost. Why so angry?

Comment on The Market Sleeps by mike in irvine

mike in irvine — Thu, 05 Nov 2009 13:28:06 -0800

yep..PROC not ROC

Comment on The Market Sleeps by Frank

Frank — Thu, 05 Nov 2009 13:22:46 -0800

Er… the PROC, right?

Comment on The Market Sleeps by really

really — Thu, 05 Nov 2009 13:15:33 -0800

really? so the last 8 years weren’t enough for you.

Comment on The Market Sleeps by no_vaseline

no_vaseline — Thu, 05 Nov 2009 13:12:11 -0800

What, sir, will that acomplish?

Comment on The Market Sleeps by Blueberry Pie

Blueberry Pie — Thu, 05 Nov 2009 13:02:41 -0800

Home “buyers” tax credit extended and expanded.

http://news.yahoo.com/s/ap/us_homebuyers_tax_credit

“Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. “

“Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn’t owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.”

“The government wants renters to go fuck themselves as they can be the ones to pay all the taxes.”

Oops…I made up that last one.